HARRISBURG, Pa. -
"If changes should be made (in the tax exemption) then changes should be made by the General Assembly," Linda Carroll, counsel for the Department of Banking, asserted during the argument before the state Supreme Court.
The stakes are enormous for state-chartered credit unions, who save as much as $20 million in state and local levies because of their tax exemption, according to conservative estimates by the Pennsylvania Department of Revenue.
Raymond Pepe, an attorney for the Pennsylvania Bankers Association, asked the court to overturn a Commonwealth Court ruling and order the lower court to hear its argument that the 1968 amendment to the state's constitution did not allow the legislature to approve the credit union tax exemption.
But the state's attorney insisted that to open the 1968 amendment to the Constitution would wreak havoc on the state's businesses and finances. "You're going to throw the entire tax code of the Commonwealth into chaos," said Carroll.
Another state attorney, Howard Hopkirk, who was representing the Department of Revenue, echoed her concerns. "Otherwise, you'll have everybody paying every tax," he told the state justices, who insisted the 1968 amendment was enacted because the framers of the state Constitution wanted to maintain the status quo on the credit union exemption.
Both parties agreed that the bankers' main argument, which is still before the lower court, is that the credit union exemption violates the state's uniformity clause in the constitution, because it discriminates in favor of one group of competitors.
The case is one of several brought by bankers in Pennsylvania, now ground zero for the bankers-credit union wars, with two field of membership challenges pending in federal court, too.
